Over time mortality and morbidity tables no longer reflect anticipated future projected benefits. The NAIC has adopted updated morbidity tables applicable to Long Term Disability policies.

 

DEPARTMENT OF FINANCIAL SERVICES

OIR – Insurance Regulation

RULE NOS.:RULE TITLES:

69O-154.202Definitions

69O-154.203Categories of Reserves

69O-154.204Specific Minimum Standards for Morbidity, Mortality and Interest

PURPOSE AND EFFECT: Over time mortality and morbidity tables no longer reflect anticipated future projected benefits. The NAIC has adopted updated morbidity tables applicable to Long Term Disability policies.

SUMMARY: The rules update morbidity tables applicable to Long Term Disability policies as they change over time.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION: The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: Agency personnel familiar with the subject matter of the rule amendment have performed an economic analysis of the rule amendment that shows that the rule amendment is unlikely to have an adverse impact on the State economy in excess of the criteria established in Section 120.541(2)(a), Florida Statutes.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 624.308(1), 625.121(14), 625.081 FS.

LAW IMPLEMENTED: 624.307(1), 625.081, 625.121 FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW:

DATE AND TIME: Tuesday, November 3, 2015, 9:30 a.m.

PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Kerry Krantz, Office of Insurance Regulation, E-mail: [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Kerry Krantz, Office of Insurance Regulation, E-mail: [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69O-154.202 Definitions.

As used in this rule chapter, the following terms have the following meaning:

(1) through (9) No change.

(10) Group Long-Term Disability Income. The term group long-term disability income includes group contracts providing group disability income coverage with a maximum benefit duration longer than two years. Group long-term disability income contracts are based on a group pricing structure. The term “group long-term disability” does not include group short-term disability (coverage with benefit periods of two years or less in maximum duration). It also does not include voluntary group disability income coverage that is priced on an individual risk structure and generally sold in the workplace.

(10) through (32) renumbered (11) through (33) No change.

Rulemaking Specific Authority 624.308(1), 625.121(14), 625.081 FS. Law Implemented 624.307(1), 625.081, 625.121 FS. History–New 4-14-99, Formerly 4-154.202, Amended 3-1-04, _____________.

 

69O-154.203 Categories of Reserves.

Adequacy of an insurer’s health insurance reserves shall be determined on the basis of all three categories combined. However, these standards emphasize the importance of determining appropriate reserves for each of the three categories separately.

(1)(a) No change.

(b) Minimum Standards for Claim Reserves.

1. Disability Income.

a. Interest. The maximum interest rate for claim reserves is specified in subsection 69O-154.204(2), F.A.C.

b. Morbidity. Minimum standards for morbidity are those specified in subsection 69O-154.204(1), F.A.C., except that, at the option of the insurer:

(I) For claims incurred on or before December 31, 2006, with a duration from date of disablement of less than two years, reserves may at the option of the insurer be based on the insurer’s experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

Each insurer may elect which of the following to use as the minimum morbidity standard for claim reserves:

(A) The minimum morbidity standard in effect for claim reserves as of the date the claim was incurred, or

(B) The standards as defined in (II) applied to all open claims. Once an insurer elects to calculate reserves for all open claims on the standard defined in (II), all future valuations must be on that basis.

(II) For individual disability income claims incurred on or after January 1, 2007, the minimum standards with respect to morbidity are those specified in 69O-154.204, except that, at the option of the insurer, assumptions regarding claim termination rates for the period less than two years from the date of disablement may, at the option of the insurer, be based on the insurer’s experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

(III) No change.

(IV) For group disability income claims incurred on or after January 1, 2007 and on or before September 30, 2014.

(A) No change.

(B) Assumptions regarding claim termination rates for the period two or more years but less than five years from the date of disablement may, with the approval of the Office, be based on the insurer’s experience, if such experience is considered credible, and for which the insurer maintains underwriting and claim administration control.  The request for such approval of a plan of modification to the reserve basis must include:

(i) An analysis of the credibility of the experience;

(ii) A description of how all of the insurer’s experience is proposed to be used in setting reserves;

(iii) A description and quantification of the margins to be included;

(iv) A summary of the financial impact that the proposed plan of modification would have had on the insurer’s last filed annual statement;

(v) A copy of the approval of the proposed plan of modification by the commissioner of the state of domicile; and

(vi) Any other information deemed necessary by the office.

(C) Each insurer may elect which of the following to use as the minimum morbidity standard for group long-term disability income claim reserves:

(i) The minimum morbidity standard in effect for claim reserves as of the date the claim was incurred, or

(ii) The standards as defined in Paragraph (1)(b)(iii), applied to all open claims.

(iii) Once an insurer elects to calculate reserves for all open claims on a more recent standard then all future valuations must be on that basis.

(V) No Change.

(VI) For group long-term disability income claims incurred on or after October 1, 2014, and on or before December 31, 2016, the minimum standards with respect to morbidity may be based on the 2012 GLTD termination table (http://www.naic.org/documents/01_naic_2012_group_long-term_disability_valuation_table.xls) or subsequent table with considerations of:

(A) The insurer’s own experience computed in accordance with Actuarial Guideline XLVII as included in the NAIC Accounting Practices and Procedures Manual, adopted by rule 69O-137.001(4),  and

(B) An adjustment to include an own experience measurement margin derived in accordance with Actuarial Guideline XLVII, as included in the NAIC Accounting Practices and Procedures Manual, and

(C) A credibility factor derived in accordance with Actuarial Guideline XLVII

(D) Subject to the conditions in this paragraph, the 2012 GLTD or subsequent table with considerations outlined in paragraph (B) shall be used in determining minimum standards with respect to morbidity for group long term disability claims incurred on or after January 1, 2017.

(VII) Subject to the conditions in this Section, the 2012 GLTD or subsequent table with considerations outlined in Paragraph (b)1 shall be used in determining minimum standards with respect to morbidity for group long term disability claims incurred on or after January 1, 2017.

(A) through (B) No change.

(1)(b)1.c. through (1)(b)2. No change.

(2)  through (3) No change.

Rulemaking Specific Authority 624.308(1), 625.121(14), 625.081 FS. Law Implemented 624.307(1), 625.081, 625.121 FS. History–New 4-14-99, Formerly 4-154.203, Amended 3-1-04, 4-7-05, 11-2-06,______________.

 

69O-154.204 Specific Minimum Standards for Morbidity, Mortality and Interest.

Specific minimum standards for morbidity, mortality and interest which apply to claim reserves according to year of incurral and to contract reserves according to year of issue:

(1) Morbidity.

(a) No change.

(b) Minimum morbidity standards for valuation of specified group contract health insurance benefits shall be as follows:

1. Disability Income Benefits Due to Accident or Sickness , where rules 69O-154.201 -  69O-154.210  reference 69O-154.204; otherwise Actuarial Guideline XLVII, as included in the most current version of the NAIC Accounting Practices and Procedures Manual adopted by rule 69O-137.001(4).

1. a. through b. No change.

(c) No change.

(2) through (3) No change.

Rulemaking Specific Authority 624.308(1), 625.121(14), 625.081 FS. Law Implemented 624.307(1), 625.081, 625.121 FS. History–New 4-14-99, Formerly 4-154.204, Amended 3-1-04, 4-7-05, 11-2-06, ____________.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Kerry Krantz, Office of Insurance Regulation, E-mail: [e-mail]

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: THE FINANCIAL SERVICES COMMISSION

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: September 29, 2015

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: May 15, 2015